Econet fears foreign currency challenges

ECONET Wireless Zimbabwe (EWZ) says it fears that foreign currency challenges will constrain its envisioned US$135 million capital expenditure programme, as the mobile network operator intends to invest more in operations to accommodate increased demand for its services.

Telecommunications firms are considerably dependent on imported equipment and accessories which makes them much needy of foreign currency.

Foreign currency mainly United States dollars, is required to settle external obligations with vendors who provide equipment and systems used to run the network.

Presently, the MNO is in the process of implementing a virtualised core network that is anticipated to replace the current core network system. According to EWZ these upgrades which are aimed at improving quality and coverage will allow the firm to introduce supplementary products and services to enrich the customer experience.

The intended developments also encompass radio network upgrades in Harare, Bulawayo, and Manicaland, all scheduled for completion during 2023.

According to the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ), EWZ is the only mobile network operator with 5G infrastructure, translating to a 100 percent market share in 5G, showing constant evolvement of the firm’s business in the local terrain EWZ generates some of its income through airtime sales which are predominantly in Zimbabwe dollars, but like other operators, the firm has introduced US dollar-denominated airtime vouchers.

As such, EWZ sees the growing use of the USD in the local economy giving a leeway to more access to the sought-after foreign currency.

The Zimbabwe dollar component of income has recurrently fallen victim to inflation, which this year wreaked havoc in the local economy mainly in the second quarter where the parallel market exchange rate reached an all-time low of $8 500 against US$1, while the average weighted foreign exchange rate reached its weakest of $6 926 on Reserve Bank of Zimbabwe (RBZ) auction on June 20, 2023.

But the last foreign exchange auction conducted on 20 July 2023 saw the official exchange rate firmed to $4 537 against the greenback while the parallel market is taking the same form in terms of strength.

The local telecommunications industry has overall been struggling to meet the coverage demands of consumers as capacity enhancements and routine maintenance remain severely constrained by the lack of access to foreign currency to pay for services offered by foreign suppliers.

RBZ has however been doing its part by availing some of the foreign currency but of course that has not been enough, given operating costs that continue to spiral.

“Increase in volumes require further investment into platforms and systems that drive network capacity and capabilities. Our capital expenditure programme which continues to be constrained by the lack of availability of foreign currency to pay our suppliers over the next 12 months is expected to be about US$ 135 million.

“This capital expenditure will require a supportive pricing regime given the inflation trends and currency depreciation,” said Charles Banda, EWZ group company secretary in the firm’s trading update for the quarter to May 2023.

The company indicated that it continues to record growth in demand for its services and in the period under review voice and data usage surged 30 percent and 31 percent respectively.

Like the generality of the economy EWZ has started to see growth in the proportion of USD denominated sales to local customers and this trend is expected to ease the firm’s challenges in terms of paying key suppliers.

According to POTRAZ’s abridged postal and telecommunications sector performance report for the first quarter of 2023 the inflationary environment, unavailability of credit, reduced consumer spending, and inadequate foreign currency amongst other challenges continued to beset the sector.“Inadequate foreign currency has affected network expansion and maintenance efforts.

Unlike other services that may have alternative local supply, the provision of telecommunication relies heavily on imports mainly equipment, software as well as bandwidth.

“The sector should be prioritised in terms of government expenditure, resource mobilisation, foreign currency allocation among other issues, to fully realise its role as a key economic enabler,” said Potraz.

According to POTRAZ a total of 86 new base stations were deployed in the first quarter of 2023, as compared to 175 base stations deployed in the fourth quarter of 2022 with Long-Term Evolution(LTE) having the highest number of deployments, followed by 3G.

-ebusinessweekly